America's GM exit strategy

From NBC's Chuck ToddIn yet another briefing with a few reporters, leaders of the auto task force attempted to clarify exactly how and when the U.S. could sell its shares of the new General Motors. In short, if everything goes swimmingly with the government's taxpayer investment, the government could be out of the auto business for good within 5 years, but that's probably an optimistic timeline. Let me explain further.

First, let's clear up a few things. The new GM will buy the necessary assets of the old GM sometime in the next 60-90 days when a bankruptcy judge allows the sale to take place. After that, the actual sale of old assets to the new GM could take several more weeks. So at this point on the calendar, we're looking at October or November before this new private company, once again called General Motors, will come into existance.

So at this point, New GM, will be a privately-held company, not traded publicly on the New York Stock Exchange (or any stock exchange for that matter). However, it is the intention of the Obama administration to get New GM to become a publicly traded company as soon as reasonably possible. In this case, auto task force czar Steve Rattner, a private equity expert himself, believes that sometime in 2010 (probably mid-late 2010), New GM will have an "I.P.O." -- or an initial public offering. And it's at that point where the taxpayer can have an easier time tracking just what the U.S. government's shares are worth.

In fact, Rattner said it's very possible the first round of shares that the government sells will be at I.P.O. time, perhaps as much as 10% of the government's holdings. One thing Rattner and others on the task force assured reporters is that you wouldn't see the government sell its 60% stake in one fell swoop. It would be a gradual sell-off, starting at I.P.O. time and gradually getting out, which is why Rattner believes it's probably a 2-5 year process, AT BEST, for the government's investment.

BTW, since New GM will be a private company until the I.P.O., it means LEGALLY, the New GM could keep a lot of sales and other key business data private. However, Rattner said that because of the significant taxpayer investment, they know New GM has to be as transparent as other public companies even during its temporary private phase.

Finally, as for the government's influence on the makeup of New GM's board of directors. Some of Old GM's board members will be asked to be on New GM's board. However a majority of New GM's board will be new members. It appears there will be 13 members of this new board, 11 of whom the U.S. government will have direct influence over. Rattner says he'd like to have the new board in place sooner rather than later but notes they have until the end of the bankruptcy proceedings to name the new board of New GM.